Operations Management: Quality Management

High quality and improved quality brings:

Better Sales and Gains In Sales

Reduced Costs in operations

Better Sales and Gains In Sales because

1. The organization can sell its products for higher prices and obtain higher profit margins.

2. The organization gains a higher reputation and so consumers/clients trust the company's brand.

3. A company with an effective quality system is able to respond better and faster to any customer's need or problem.

Reduced Costs in Operations because

1. A well designed and managed quality system allows to lower scraps, defects, reworks, and returns.

2. The company can have lower warranty costs.

3. Because of the reduced defects and reworks and the much better amount of output with the same amount of input, the company has an increased productivity.

Quality Principles

1. Customer Focus

2. Continuous Improvement

3. Bench-marking

4. Just in time

5. Use of tools of TQM (Total Quality Management)

7 Quality Tools

1. Check sheets

2. Scatter diagrams

3. Cause & effect diagrams (also named Fishbone or Ishikawa diagrams)

4. Pareto charts

5. Flow diagrams

6. Histograms

7. Statistical process control

Quality (definition)

The totality of features and characteristics of a product or service that bears on its ability to satisfy stated (explicit, clear) or implied needs.

Examples of Explicit Needs

Tasty, good, delicious, good looking, nice design, good colour, good tissue, cheap, good price, good performance, easy to manage, etc..

Examples of Implied Needs

Safe, genuine, reliable, pure

Quality defined in different ways based on the point of view of:

1. The USER- the consumer, who usually looks for performance, features he likes, low costs.

2. The MANUFACTURER- who wish to conform to standards, specifications, laws.

3. The PRODUCT- if we define quality just looking at the product we are looking for characteristics of the product that can be precisely measured.

Examples:

a. content of sugars, fats, proteins, energy and calories, vitamins

b. size

c. weight

d. resistance to impacts

e. thickness

Quality has other IMPLICATIONS

1. Company Reputation

2. Product Liability: faulty products might damage one or more consumers and so the company is liable for such damage and all its consequences.

3. Global Implications: inferior or low quality products can damage both the companies' profitability and the nation's economy and balance of payments in the foreign trade.

Costs of Quality

1. Prevention Costs

2. Appraisal Costs

3. Internal Failure Costs

4. External Failure Costs

Prevention Costs

Costs associated with reducing the potential for defective parts, items or services and they can be costs for:

Training on quality

Quality improvement programs

Preventive actions

Appraisal Costs

Costs related to the evaluation and control of materials, products, processes, parts and services:

Testing

Quality checks on incoming items, on WIP, on finished products

Laboratory tests

Inspectors and auditors' wages

Internal Failure Costs

Costs that result from the production of defective parts or services BEFORE the delivery to customers, so at least the defective items remain at the company site (internally) and the problem is managed internally.

Costs are:

Defective parts, materials, finished products

Scraps

Rework

Downtime caused by defective parts/materials

External Failure Costs

Costs the occur after the delivery of defective parts or service to the client.

External Costs are:

Return expenses

Rework for returned defective products

Returned goods to send to waste treatment process (as scraps)

Liabilities

Lost goodwill= lost future sales = damage to reputation and image

Money spent for an advertising campaign for recalling defective products that have already been sold. Nokia had to do this in 2009 as they recalled 14 million defective chargers.

Most Common International Quality Standards

ISO 9000

ISO 14000 standards are for the Environmental Management System

Standards TS in the automotive industry

ISO 22000

BRC (now GSFS)

IFS in the food industry

ISO

Set of quality standards developed by the International Standards Organization and aimed to provide precide guidelines and indications for managing properly a quality system or an environmental system.

ISO 9000

Series of standards related to the quality management systems.

ISO 9001 is the most important standard of the ISO 9000 series and the one used for assessing an organization's system and issuing the Quality Certificate if it is conform to the standard.

ISO 9001

Quality standard with international recognition.

Created in 1987.

In the USA it is named ANSI/ASQ Q9000 series.

It is a 30-page book that provides the guidelines for managing the company's processes (HR Management, Production, Checks and Controls, Relationships with clients and suppliers, site management, data management, management of complaints, recall plans, management of problems, etc).

Last updated version issued in 2008 named ISO 9001:2008

Goal and Focus of the ISO 9001 standard is

To drive organizations to establish a Quality Management System that allows the organizations being able to assure:

1. The quality level their products and services

2. Customers' satisfaction

3. A continuous improvement

For implementing a quality system a company needs to have:

Leadership and Commitment by the top direction and owners and needs to prepared documented procedures.

The needed documentation is:

1. Quality manual

2. Operative procedures for each process (sales, purchasing, production, warehousing, etc.)

3. Working instructions

4. Data recording forms for recording several information/data/issues:

a. Defects and not corm processes/situations

b. Customer complaints

c. Corrective actions implemented for solving problems

d. Internal audits

e. Training sessions

f. Internal meetings

g. Checks and tests on materials, parts and finished products

h. Process controls

i. Audits on suppliers

j. Suppliers' performance evaluation

To become ISO 9001 certified:

1. 9-18 month process depending on the company's size and complexity of its processes.

2. Having all needed documented procedures.

3. Performing an on-site self assessment for being sure all is fine.

4. Receiving a series of audits at the company and auditors check and assess procedures, recordings, products and services.

Total Quality Management (TQM)

Refers to a quality emphasis and effort in the entire organization.

Requires a commitment by management for driving the company to excellence in all aspects of products and services that are important to the customers.

7 Concepts for an effective TQM are:

1. Continuous improvement

2. Six Sigma

3. Employees' empowerment

4. Bench-marking

5. Just-in-time

6. Taguchi concepts

7. Knowledge of TQM tools

For achieving a continuous improvement Deming suggested a model based on a circle that is known as

PDCA circle or Deming circle

PDCA means PLAN - DO - CHECK - ACT

Plan

Team selects a process that needs improvement.

They define, measure and analyze the problem data.

They set goals for improvement.

They discuss alternatives for achieving the goals and they select the best alternative and with it they develop a plan with a budget for the expenses, with actions to perform, with deadlines and with responsibilities.

Do

The team implements the plan and monitors its progress.

Check

At the end of the implementation of the improvement plan, the team analyzes all data collected during the DO step to assess if results and achievements are conform to the states goals.

Act

If results are successful then the team writes a document with what has been done properly and also what needs to be avoided for not making errors and wasting time.

The team also prepares a documented procedure to be used in order to keep doing the right things and managing well the process that has just been improved.

Six Sigma

Made popular by Motorola and GE.

6 sigma in statistical sense means a process capability= 99.9997%.

6 sigma means in operations: only 3.4 defects per million parts, that virtually is "zero defects".

Designed for reducing defects.